Any form of loan is a debt one normally wants to pay off as soon as possible (ideally in advance or before it is due). Prepayment is a feature that enables you to pay back your mortgage loan (in full or in part) before the end of the loan term. Customers typically choose prepayment when they have more money.
A mortgage, however, should not be viewed as a personal loan, auto loan, etc.
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HDFC Home loan prepayment: Pointers to keep in mind
There are several ways to pre-close a home loan. You can pay the full amount at once or only a portion of it. Everything is based on the amount of money you have on hand. Before beginning the prepayment, some things to keep in mind are:
- Analyse your cash requirements for short-term, medium-term, and long-term demands. Do not jeopardise your emergency fund to pay off your mortgage.
- Additionally, determine whether investing in MFs is more advantageous than foregoing interest payments or foreclosure.
- Pay off other high-cost debts earlier.
- Your savings on an HDFC home loan interest rate will be greater if your mortgage is still in its early stages.
- Home loans with fixed interest rates come with a prepayment penalty.
You may easily prepay HDFC home loan online by using the customer portal.
How to prepay an HDFC home loan?
There are two ways to prepay your HDFC home loan:
Part prepayment
Partially prepaying your debt is an option when funds are available or at regular intervals. Prepaying the extra amount over and above your EMI will lower the loan’s principal and your interest payments. After making a prepaid or partial payment, you have two options for your subsequent EMIs:
- You can lower your monthly EMI payment while maintaining the same loan term.
- Reduce the loan duration while keeping the EMI amount the same.
Foreclosure
When you choose to pay out your home loan and all associated interest to the bank in full at once, you are choosing to go through with a foreclosure. There can be some fees associated with prepayment. Each bank has a different set of fees.
Preclosing HDFC home loan: Online procedure
Keep your bank notified of your choice to prepay or foreclose the mortgage, first and foremost. Even if you intend to make partial payments, you must let the bank know since they will adjust the tenure and the payment schedule as necessary. The associated insurance for your house is decreased when you pay back your mortgage. As a result, the insurance matures at final closure. There is no reimbursement for the premium.
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Foreclosure process for HDFC home loans online
Make a list of all the paperwork you gave the bank when you applied for the loan whenever you are ready for the foreclosure. Once the debt is repaid, this enables them to access all information from their records. A possible list of documents might be as follows:
- Possession letter
- Sale Deed of the property
- Builder Buyer Agreement
- Conveyance Deed
- Tripartite Agreement
The bank will determine the total amount owed, including any applicable interest and penalties. Next, send the money via a demand draft or a check. The bank will send you an acknowledgement letter after the whole sum has been paid off to them. It will take a few days for the bank to send you the paperwork, so the NOC (No Objection Certificate) and the No Dues certificate will come after.
After the loan is paid, the bank will provide you with all of your original property documents and certify that you are the legal owner of the property and that it is no longer subject to amortisation. Checking the update on your CIBIL data is important. At least 40 days will pass before it appears in your report. Additionally, make sure you carefully save the bank paperwork that serves as evidence of loan repayment. You can use the same in the event of a disagreement at a later time.
HDFC home loan prepayment online: How to make partial payments?
Online HDFC home loan partial prepayment is possible. You must submit an online payment using internet banking or do what you normally do for EMIs. However, be careful to review the loan account statement next month and obtain confirmation of the same. Your loan tenure or EMI will vary due to the prepayment. You must visit the bank branch and notify the bank if you wish to cancel the account.
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Prepayment/ foreclosure fees for floating rate loans with HDFC home loans
- If an individual borrower chooses to prepay or foreclose on their HDFC house loan, there are no fees associated with either action.
- The following rules will apply to borrowers who are not individuals (i.e., businesses, sole proprietorship firms or HUFs acting as co-applicants).
- Within the first six months of the loan, there will be a two per cent prepayment penalty for prepaying an HDFC home loan. There will also be applicable taxes, statutory levies, and charges.
- Up to 25% of the initial principal loan amount may be prepaid without incurring any fees after the first six months and for a maximum of 36 months. Prepayment fees of 2% will apply to any prepaid amount that exceeds 25% in any given fiscal year.
- After the first 36 months, there are no fees associated with early loan payback.
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Prepayment/foreclosure fees for fixed and combination rate loans with HDFC home loans
- For individual borrowers, for balance transfer or refinancing, 2% of the amount being prepaid in addition to the applicable taxes and other statutory charges will be levied.
- For companies, sole proprietorship, partnership, or HUF:
- If the home loan is being prepaid in the first 6 months, then 2% of the amount being prepaid in addition to the applicable taxes and other statutory charges will be levied.
- If the home loan is being prepaid after six months but up to 36 months, then:
- No charges will be levied up to 25% of the opening principal amount each financial year.
- 2% charges will be levied if the prepaid amount grosses 25% of the opening principal amount each financial year.
- If the home loan is being prepaid after 36 months, no charges will be levied.
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